An average variable cost function is estimated as AVC= 96 2Q + 0.05Q2 When Q=100
ID: 1211233 • Letter: A
Question
An average variable cost function is estimated as AVC= 96 2Q + 0.05Q2 When Q=100 and the firm tries to produce one more unit, its average variable cost will be _____.
A.there are too many firms in the industry.
B.most firms charge a high price for their products.
C.all firms’ marginal costs are very low.
D.no firm has market power.
A.there are too many firms in the industry.
B.most firms charge a high price for their products.
C.all firms’ marginal costs are very low.
D.no firm has market power.
Explanation / Answer
Answer:
C. all firms’ marginal costs are very low
AVC = 96 + 2Q + 0.052
If Q = 100
AVC = 96 – 200 + 200
AVC = 96
The firm tries to produce one more unit, its average variable cost will be all firms’ marginal costs are very low.
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